Shares of the major banks were lower in after-hours trading. Bank of America's stock edged down 0.6%, after closing during regular trading at $5.08, its lowest level since March 2009.

Banks outside of the United States also suffered ratings downgrades, including London-based Barclays (BCS) and HSBC (HSBC) and Swiss bank UBS (UBS).

Dutch bank Rabobank lost its AAA rating as a result S&P's changes. Prior to the downgrade, it was the only bank of the word's 37 largest that still held the pristine rating.

Including all of the major banks' subsidiaries, S&P's ratings cuts affected dozens of banks.

On the bright side, Bank of China and China Construction Bank Corp. were upgraded by one notch, from A- to A. They Chinese banks were the only two to enjoy a ratings boost.

S&P's new ratings methodology, announced earlier this month, evaluates banks' creditworthiness based on economic and industry risks, bank-specific strengths and weaknesses, as well as "likelihood of external government or group support."

Financial institutions have had a tough year, with a choppy economic recovery, volatile markets, and concern about what exposure they may have to the European debt crisis.

"U.S. banks are healthier than most Americans are willing to give them credit for, but banking is a business of confidence, and downgrades across the board like this are just another strike against them," said Jack Ablin, chief investment officer at Harris Private Bank.